Credit Suisse Energy Analysts Upgrade E&P Sector To Overweight, See 'Attractive' Entry Point

One of the biggest debates on Wall Street right now is whether or not a recovery is imminent in the battered oil & gas industry. In a brand new report, Credit Suisse analyst Mark Lear says that enough is enough and upgrades the oil & gas exploration and production (E&P) sector to Overweight.

Overview

While OPEC seems stubborn about its production levels, Lear believes that a reduction in non-OPEC international production will eventually provide an opportunity for U.S. producers to get back in the game.

The current environment has forced many E&Ps to focus on strengthening their balance sheets. When commodity prices start to recover, the companies with the strongest assets will be able to accelerate the most.

Although Lear believes that investors should be selective in choosing E&P investments, he feels that there are a handful of names that have limited downside with WTI prices at around $60/bbl and “decent” upside with WTI prices in the $70’s/bbl.

Gas Rebound

Lear sees 2016 as a better year for natural gas. He believes that drop-offs in production and higher demand could lead to higher winter prices. “However, as prices rise, supply will respond and we see sufficient low cost or associated gas to meet rising demand at a longer term natural price of $3.75/mmbtu,” he explains.

Stock Picks

In the report, Lear cautions that “we may be early,” but Credit Suisse assumes coverage at Outperform on a number of E&P stocks. Here’s a full list of the firm’s new Outperform calls:

EOG Resources Inc (NYSE: EOG)
EP Energy Corp (NYSE: EPE)
Parsley Energy Inc (NYSE: PE)
Pioneer Natural Resources Co (NYSE: PXD)
Denbury Resources Inc. (NYSE: DNR)
Anadarko Petroleum Corporation (NYSE: APC)
Devon Energy Corp (NYSE: DVN)